On Tuesday, oil prices increased more than 1%. This recouped some of the previous session’s losses when prices hit a three-week low. Gains are likely to be restricted because mounting COVID-19 cases and Chinese curbs may dampen fuel demand.
Brent crude was up 84 cents, or 1.2 per cent, at $69.88 a barrel by 0656 GMT, after sliding 2.3 per cent the previous day. Oil in the United States rose 99 cents, or 1.5%, to $7.47 per barrel after falling 2.6 per cent the last session.
China reported more COVID-19 infections in the newest outbreak of the disease. That was first spotted in the country in late 2019. Observers described this as the most significant test of Beijing’s zero-infection approach.
As authorities attempt to eradicate locally transmitted illnesses, some cities in China, the world’s largest crude oil importer, have increased mass testing.
According to Avtar Sandu, the oil market may be volatile in the medium term. It might have periodic pullbacks as crude prices continue to struggle, adding that any significant price drop is a buying opportunity.
Additional Iranian, United Arab Emirates, and Libyan barrels may enter the market, but overall world GDP has expected to rise.
In the United States, the Senate has poised to vote later Tuesday on ratifying a $1 trillion infrastructure bill. If passed, it will stimulate the economy and demand for oil products, according to analysts. However, rising COVID-19 instances are clouding the outlook for economic growth and total spending.
Investors are likewise sceptical about the recovery in the United States, citing rising case numbers. Due to persistent travel restrictions, ANZ Research wrote in a note that U.S. air travel has plateaued for nearly two months.
Nonetheless, oil, gasoline, and other product stockpiles in the United States are likely to have fallen last week. Gasoline stocks should fall for the fourth time in a row.
Complicating matters starts a relaxation period for members of the Organization of Petroleum Exporting Countries and its allies, OPEC+. The organization began placing an additional 400,000 barrels of oil per day on the market in early August. However, new cases of COVID-19 are taking the spotlight.
The rapid spread of the Delta coronavirus variant in Asia and parts of the United States has shifted market attention back to demand concerns, said Ole Hanson, head of the commodity strategy at Saxo Bank in Denmark.
According to Hanson, when OPEC, the International Energy Agency, and the United States Energy Information Administration release reports for August, we will feel the market. The Federal Reserve Bank of Atlanta reduced its projection for third-quarter GDP growth from 6.1 per cent to 6 per cent last week. This provided a glimpse into market pessimism.